Contagion in Latin America: Definitions, Measurement, and Policy Implications / Kristin Forbes, Roberto Rigobon.

Format:

Book

Author/Creator:

Forbes, Kristin.

Contributor:

National Bureau of Economic Research.

Rigobon, Roberto.

Series:

Working Paper Series (National Bureau of Economic Research) no. w7885.

NBER working paper series no. w7885

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Other Title:

Contagion in Latin America

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2000.

Summary:

This paper analyzes bond and stock markets in Latin America and uses these patterns to investigate whether contagion occurred in the 1990's. It defines shift-contagion' as a significant increase in cross-market linkages after a shock to one country or region. Several coin-toss examples and a simple model show that the standard tests for contagion are biased due to the presence of heteroscedasticity, endogeneity, and omitted-variable bias. Recent empirical work which addresses these problems finds little evidence of shift-contagion during a range of crisis periods. Instead, this work argues that many countries are highly interdependent' in all states of the world and the strong cross-country linkages which exist after a crisis are not significantly different than those during more stable periods. These findings have a number of implications for Latin America.

Notes:

Print version record

September 2000.